Cement hill too small for two?

With an oversupply of cement in the local Namibian market as well as overcapacity in the Southern African Customs Union (SACU), it is questionable if a second cement plant would be beneficial for the country.
Namibia’s current cement consumption is 600 000 tons per year. Namibia’s first cement factory, Ohorongo Cement, can produce one million tons per year.
The second cement plant now being built, the Cheetah Cement, a joint venture between Namibian owned Whale Rock Cement the Chinese company West China Cement Ltd, indicated at its launch last year that, the US$350 million (N$5.5billion) project will have a capacity to produce 1.5 million tons per year.
An additional 200 000 tons of cement is being imported from China by Jack’s Trading owned by Yuequan Jack Huang, President Hage Geingob’s partner in the residential project in the farmlands of Klein Windhoek to be built by African Sunrise Investment.
This leaves Namibia with an oversupply of cement by no less than two million tons annually, an oversupply which according to forecasted growth rates in cement consumption will remain until at least 2025, both locally and within SACU.
The chief executive of Whale Rock Cement, Zedekias Gowaseb, is however not convinced that there is an oversupply of cement.
“If Ohorongo is oversupplying, why are we importing cement from China and South Africa? Why is the market still open?” he questioned last week.
According to forecasted figures, Namibia’s domestic cement consumption will remain below 800 000 tons per year until around 2022.
Consumption on huge projects like Neckertal Dam and the Walvis Bay harbour will slightly push up consumption above the 800 000 mark by 2018.
The figures, however, indicate that consumption will remain below one million tons per year until at least 2025, which means that Ohorongo’s production capacity will remain higher than the domestic consumption until then.
This raises the question if an additional cement plant will mean additional value or additional work places, or whether it will result in more efficient and environmentally sound production.
The prospect of exporting Namibia’s cement to SACU countries is at best uncertain considering the overcapacity of seven million tons a year.
This is compounded by the fact that neighbouring countries like Angola and Zambia have opted to close their borders for cement imports to protect their own products.
This fact also does not deter Gowaseb’s enthusiasm for Cheetah Cement’s prospects.
Gowaseb said the company intends to export to other African countries as well as to South American markets. He said with the experience of the Chinese company, the joint venture is also considering building another cement plant within SACU.
West China Cement Ltd already has 17 cement plants globally with a capacity of 30 million tons, he said. The company is listed on Stock Exchanges in Hong Kong and London.
“Competition is good for the country which must become an exporter for change,” Gowaseb said.
Whether this competition is going to push Ohorongo’s back against the ropes also remains to be seen.
Schutte seems unfazed.
“Competition is a good thing and Ohorongo welcomes it as long as it is fair and the playing field is level. We have the best equipment, the best people and products of international quality.”


CATHERINE SASMAN